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Federal Reserve Bank OF DALLAS T O N Y J . SALVA G G IO first vice president November 6, 1991 d a lla s , te x a s 75222 Notice 91-91 TO: The Chief Operating O ffic e r of each fin a n c ia l i n s t i t u t i o n in the Eleventh Federal Reserve D i s t r i c t SUBJECT Operating Circular 12 (Check and Return Item Settlement and Delivery) DETAILS As stated in C irc u la r 90-92 and C irc u la r 90-93, a l l issued by the Federal Reserve Bank o f Dallas w i l l be renamed Operating C irc u la rs in order to conform to the language used Commercial Code. Accordingly, B u lle t in 12 is being reissued C irc u la r 12 (Check and Return Item Settlement and D e liv e ry ). the b u lle tin s and reissued as in the Uniform as Operating ENCLOSURE Enclosed is Operating C irc u la r 12. Please f i l e i t in your Operating C irculars ( B u lle tin s ) binder and discard the old version. MORE INFORMATION For more information regarding check and return item settlement and d e liv e ry , please contact Robert Whitman, (214) 698-4357, at the Dallas O ffic e ; Eloise Guinn, (915) 521-8201, at the El Paso Branch; Luke Richards, (713) 652 1544, at the Houston Branch; or Herb Barbee, (512) 978-1402, at the San Antonio Branch. For additional copies o f t h is Bank’ s notice or Operating C irc u la r 12, please contact the Public A f f a i r s Department at (214) 651-6289. Sincerely, r For additional copies, bankers and others are encouraged to use one of the following toll-free numbers in contacting the Federal Reserve Bank of Dallas: Dallas Office (800) 333-4460; El Paso Branch Intrastate (800) 592-1631, Interstate (800) 351-1012; Houston Branch Intrastate (800) 392-4162, Interstate (800) 221-0363; San Antonio Branch Intrastate (800) 292-5810. This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) O e tin (M ar p ra g F e d e r a l R e s e r v e B a n k of D a l l a s Check and Return Item Settlement and Delivery Scop Operating Circular 12 sets forth the terms and conditions under which the Federal Reserve Bank of Dallas and its Branches at El Paso, Houston, and San Antonio will automatically settle to an account on the books of the Federal Reserve Bank for commercial cash letters, return item letters, and related adjustments or entries. It also covers this Bank’s off-premises delivery of cash letters and the presentment of return letters. F ederal R eserve B a n k of D allas 11-91 . T beafdntents ir al CHECK AND RETURN ITEM SETTLEMENT AND DELIVERY Paragraphs G eneral............................................................................................... 1-3 Method of Paym ent.......................................................................... 4 -7 Advices and Adjustments.................................................................. 8-9 Entries for Cash Letter Deposits, Return Letter Deposits, and Adjustment and Service Charges....................... 10-11 Tim ing................................................................................................ 12 Delivery and Presentment................................................................. 13-14 Succession.......................................................................................... 15 Suspension......................................................................................... 16-17 Term ination....................................................................................... 18 Right to A m end.................................................................................. 19 Exhibit 1: Automatic Charge/Credit Agreement Exhibit 2: Letter of Authority to Deliver Cash Letters and/or Return Letters 11-91 F e d e ra l R ese rve B a n k of D allas Ge n e r al 11. This Operating Circular provides for paym ent by autom atic charge to an account at a Federal Reserve Bank m aintained or used by a bank (as paying or depositary bank) for the gross am ounts o f cash letters and return letters received from this Bank and for other credits or debits and fees in connection with cash letters, cash items, return letters, or returned checks handled o r accounted for by this Bank. This Operating Circular also provides for requests for delivery and presentm ent o f cash letters and return letters, if applicable, to locations other than the premises o f a bank. This Operating Circular is issued pursuant to Sections 4, 13, 14(e), and 16 o f the Federal Reserve Act and related statutes and in conform ity with the provi sions o f related statutes and Subpart A o f Regula tion J and Subpart C o f Regulation CC o f the Board o f Governors o f the Federal Reserve System. It is binding on each party interested in an item this Bank handles. 2. The definitions o f term s set forth or incorpo rated in Regulation J, term s defined in Regulation CC, and term s defined in this Bank’s Operating Circular 8 (Bulletin 8) apply in this Operating Circular, except as otherwise provided. “Respon dent” is defined as a bank or nonbank payor that receives from or presents to this Bank cash items or returned checks for paym ent or credit. “C orre spondent” is defined as a bank that settles for another bank through its own account at the Federal Reserve Bank. M any term s used in this Operating Circular have specialized meanings that have developed through law, custom, or com m er cial usage. Unless otherwise stated, references such as “this Bank,” “we,” “us,” and “o u r” are to the Federal Reserve Bank o f Dallas and its Branches at El Paso, Houston, and San Antonio. 3. This Operating Circular also applies to any state or political subdivision o f a state to which we present direct as cash items any bills, notes, or warrants that are issued by the state or political subdivision and that are payable in the Eleventh Federal Reserve District. M e t h o d o f Pa y m e n t 4. If paym ent for cash letters and return letters is to be m ade by charge to a respondent’s account on our books or by charge to the account o f another bank (correspondent bank) on our books or on the books o f another Federal Reserve Bank (by 11-91 arrangem ent), the respondent bank m ust execute our Autom atic Charge/Credit Agreement (“autocharge agreem ent”), Form TR-383. By execution o f the agreement, the ban k also agrees to the term s o f this O perating Circular and our Operating Circulars 8 and 10 (Bulletins 8 and 10), which pertain to the collection and return of cash items. If the settlement is to be posted to another bank’s account on our books, the correspondent bank m ust authorize such action and agree to the term s o f this Operating Circular by signing the autocharge agreement. Operating Circular 12 5. W e charge the account m aintained or used by the paying bank for the gross am ou nt o f cash letters on the banking day o f receipt o f the cash letters, as provided in Section 210.9 o f Regulation I and in Operating Circular 8. W e charge the account m aintained or used by the depositary bank for the gross am o un t o f return letters on the banking day o f receipt o f the return letters, as provided in Section 229.32 o f Regulation CC and in Operating Circular 8. 6. A bank paying for cash letters or return letters by a charge to its own account agrees to m aintain to its credit, in its reserve or clearing account on our books, a balance o f actually and finally col lected funds sufficient to cover charges under this Operating Circular and all other charges to the b ank’s account. 7. If paym ent for cash letters o r return letters is to be m ade by a charge to a correspondent bank’s account on our books, the correspondent bank agrees to m aintain to its credit, in its reserve or clearing account on our books, a balance of actually and finally collected funds sufficient to cover charges under this Operating Circular and all other charges to the bank’s account. Unless otherwise agreed by the respondent bank and its correspondent bank, the respondent bank agrees to m aintain in its account with the correspondent bank a balance, free from any encum brance, sufficient to cover all charges under this Operating Circular; and the correspondent bank may debit and credit to the respondent bank ’s account the am ou nt o f any debit or credit m ade by us to the correspondent bank’s account, under this O perat ing Circular, for entries to the respondent bank. But we assume no responsibility for any obliga tions o f the respondent bank and its correspon dent bank to each other. F e d e ra l R es e rv e B a n k of D allas 1 Operating Circular 12 A d v ic e s a n d A d j u s t m e n t s 8. W e send to a bank and to its correspondent bank an advice o f charge for ou r cash letter or return letter. The bank m ust notify us, by a telephone call to the C ustom er Assistance Division or to the Adjustm ents Division of its local Federal Reserve office, o f nonreceipt o f a cash letter or return letter. The bank m ust notify, by prescribed form, the Adjustm ents or Return Items Division of the office that sent the cash letter or return letter of a difference exceeding $1 between the am ount of the items received in a cash letter or return letter and the am ount o f an advice o f charge. If we receive pro m pt notice, we will make an appropri ate credit or debit to the account m aintained or used by the respondent bank. If a bank subse quently receives the cash letter, return letter, or item that was credited by us upon receipt o f a notice o f nonreceipt or difference and it is not covered by another advice o f charge, the bank m ust prom ptly notify the Adjustm ents or Return Items Division o f the office that sent the cash letter or return letter. W e will charge the account m aintained or used by the bank for the letter or item. W e reserve the right to make appropriate aso f adjustm ents for reserve purposes if we do not receive p ro m p t notice. See Operating Circular 8 for the handling o f missent items. 9. An account holder m ust notify us prom ptly o f any objection to our statem ent o f account regard ing charges or credits for cash items, cash letters, return letters, or adjustm ents thereto. ENTRIES FOR CASH LETTER DEPOSITS, R e t u r n L e t t e r D e p o s it s , a n d A d j u s t m e n t a n d Se r v ic e C h a r g e s 10. U nder this Operating Circular, we also credit or debit the account m aintained or used by a bank for cash letters sent to us by the bank for collec tion, for return letters sent to us by the bank for return, for other transactions with cash letters and return letters sent by the bank to us for collection and return, and for cash letters and return letters received by the bank from us, including service charges. W e send advices o f credit or debit to the bank and its correspondent bank. Settlement for noncom m ercial cash letters (U.S. Treasury checks, savings bonds, postal m oney orders, and food coupons) is no t covered under this Operating Circular. 2 11. W e give credit for cash items or return checks, upon receipt at this Bank’s office, that have been sent with our perm ission to a relay station m ain tained by us. Senders are responsible for filling o i ^ P receipts for deposits at a relay station, and we have no responsibility for identifying items lost between a relay station and our office. T im in g 12. Deferred credits or debits will be posted to a designated account at the tim e o f origin. Because we process 24 hours a day, it may be necessary to post some entries (online adjusting entries and offsite cash letter charges) to a newly designated account one banking day before the designated effective date on the autocharge agreement. DELIVERY AND PRESENTMENT 13. W e may make delivery and presentm ent to locations other than a bank ’s own premises, as provided in Operating Circular 8 and this O perat ing Circular. If a bank wants delivery or present m ent o f cash letters or return letters to be m ade to a location other than its own premises, either within or w ithout the territory of our processing office, or if a bank has n ot m ade other arrange m ents and we m ust mail its return letters to the bank, it m ust execute our Letter o f Authority to Deliver Cash Letters and/or Return Letters, Form TR -411. The bank agrees that any loss of, damage to, or expenses o f tracing and duplicating any item occurring after delivery or presentm ent thereof by us and before return o f any such item to us shall be at its risk and expense. The bank also agrees to hold us harmless from any loss incurred by reason of, or arising out of, any delivery or mailing by us hereunder and from any loss incurred by reason of, or arising out of, the respondent ban k’s failure to perform any o f its obligations. The bank further agrees to com ply with the provisions o f Regulation J, Regulation CC, our Operating Circular 8, and this Operating Circular, including the timely return of unpaid items, as if the cash letters or return letters had been delivered directly to the respondent bank. 14. If a respondent bank appoints a processing organization to receive its items, it also appoints and entitles the processing organization to be the bank’s agent to m ake the notifications and re quests called for in our operating circulars and in Board regulations and to forward return checks to us. This appointm ent of the processing organiza- F e d e ra l R e s e rv e B a n k of D allas 11-91 tion as agent does not relieve the respondent bank o f any liabilities to this Bank un der this Operating Circular or otherwise. I R ig h t t o A m e n d Operating Circular 12 19. We reserve the right to am end this Operating Circular and any appendix, exhibit, or supplem ent to it at any time. Su c c e s s io n 15. A nam e change, merger, or succession does no t term inate an agreem ent hereunder. However, we request that a new agreem ent be filed with us in a timely m anner. Su s p e n s io n 16. A correspondent bank or respondent bank may suspend its authorization for a specific daily autom atic charge to its account by delivering written notification to an officer o f the Financial Planning and C ontrol D epartm ent or Payments M echanism D epartm ent at the respondent bank’s local Federal Reserve office by 1:00 p.m. If the respondent bank suspends an autom atic charge, it m ust furnish other acceptable and timely paym ent to us, or the charge will stand. If the correspondent bank suspends a specific daily autom atic charge, it also m ust notify an officer o f the respondent bank by 1:00 p.m. ^ ^ 1 7 . 1 he charge will be m ade to the correspondent ban k’s account unless remittance in an alternative form acceptable to this Bank is received by the end o f o ur banking day. The suspension does n ot affect the continuing existence o f the autocharge agree m ent, which remains in place until terminated. T e r m in a t io n 18. Agreement to this Operating Circular may be term inated by this Bank, the respondent bank, or the correspondent bank (as to paym ent) and by this Bank, the respondent bank, or the processor (as to delivery and presentm ent) by delivery o f a written notice or replacement agreement. Notice to this Bank will be effective five banking days after receipt o f the notice by us or on another day, specified in the notice, that is agreeable to us. Term ination by this Bank will be effective at the tim e stated in our notice. Term ination will not affect our right to make entries to the account for all cash letters or return letters handled or dis patched by us and for all adjustm ents initiated by ^ ^ u s before the term ination. 11-91 F e d e ra l R ese rve B a n k of D allas 3 EXHIBIT 1 AUTOM ATIC CHARGE/CREDIT AGREEMENT o: Federal Reserve Bank of Dallas at □ Dallas □ El Paso □ Houston □ San Antonio T h e _______________________________ respondent bank, and correspondent bank (if applicable), agree to the terms and conditions set forth in your Operating Circular 12 fo r the automatic charging and crediting of entries pertaining to the collection and return of cash items. We, the respondent bank and/or correspondent bank, hereby authorize the Federal Reserve Bank to make entries to our account as follows: □ □ 1 (a) Charge correspondent's account for cash items drawn on respondent. (b) Charge respondent's account for cash items drawn on it. □ 2 (a) Charge/creditcorrespondent'saccountfor return letters and subsequentcash letter adjustments. (b) Charge/credit respondent's account for return letters and subsequent cash letter adjustments. □ □ 3 □ (a) Credit correspondent's account for commercial cash letters deposited by respondent and make related adjustments thereto. (b) Credit respondent's account for commercial cash letters it deposits and make related adjustments thereto. Service fees w ill be posted to the same account as the related service. This agreement w ill become effective on and should be received at the ^J^Federal Reserve no later than five (5) business days before the stated effective date. We, the party(ies) below, have caused this agreement to be executed by our duly authorized officer(s). Name of Respondent Bank Routing Number(s) Location ( ) Telephone Number City Mailing Address City Authorized Signature State ZIP Printed Name and Title We agree to be the correspondent bank fo r the above-named respondent bank and agree to the terms and conditions set forth in your Operating Circular 12. We authorize you to charge and/or credit our account on your books, as evidenced in this agreement. Name of Correspondent Bank Routing Number (Account) ^Mailing Address City TR-383 (8-90) Authorized Signature State ZIP Printed Name and Title EXHIBIT 2 LETTER OF AUTHORITY TO DELIVER CASH LETTERS AND/OR RETURN LETTERS To: Federal Reserve Bank of Dallas at □ Dallas □ El Paso □ Houston □ San Antonio The__________________________________________________________________________ (N am e , Office, Routing N u m b er of the Depository Institution) hereby requests you to make presentment of all drafts, checks, and other cash items drawn on us and being presented by or through your Bank to our agent (processor), listed below, by the delivery of said items to processor or to its messenger. By making this request, this institution agrees to the terms and conditions set forth in Regulation J and Regulation CC of the Federal Reserve Board of Governors, Federal Reserve Bank of Dallas' Operating Circulars 8 and 12 pertaining to the collection and return of cash items, and any amendments and changes to the regulations and operating circulars that may be made hereafter. ______________________________________________________ ( Name of Processor (Agent) Delivery Location _________________________ ) Telephone Number City State ZIP Routing Number We also request and authorize the delivery of our return letters as indicated below. Check One: □ Please deliver our return letters with our cash letters to our processor. Processor has agreed to accept our return letters and other settlement documents from the Federal Reserve. □ Please make our return letters available for pickup at the Federal Reserve office. □ Please mail our return letters to us. □ Other:_______________________________________________________________________________ . This agreement will become effective o n _______________________ and should be received at the Federal Reserve no later than five (5) business days before the stated effective date. Name of Respondent Bank Location # Routing Number(s) City Mailing Address City TR-411 (8-90) ( ) Telephone Number Authorized Signature State ZIP Printed Name and Title